Goldman Sachs: Here’s Where to Find Cheap Growth

By Ben Levisohn

The equity team at Goldman Sachs led by David Kostin has a problem. See, they think the stock market is heading higher–they think the S&P 500 will hit 2,100 in 2015. They also think the market looks, if not expensive, at least fully priced. They explain why that’s a problem:

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The combination of improving growth, elevated equity valuation, and low bond yields creates a conundrum for investors. Higher growth and low yields favor a shift into pro-cyclical equities but sticker shock following a prolonged rally makes the decision less clear. We remain positive on Cyclicals outperforming Defensives and believe tight valuation dispersion means different growth is being assigned similar prices.

Eaton has gained 2.4% to $79.42 at 12:58 p.m. today, while Whirlpool has risen 1.2% to $140.47, GameStop has advanced 0.7% to $40.37, Freeport-McMoRan has jumped 3% to $35.89 and Dow Chemical is up 0.8% at $52.91.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.